Coherent Pre-Q3 Earnings: Buy or Sell the Stock Ahead of Results?

Coherent Corp. COHR will report third-quarter fiscal 2025 results on May 7, after market close.The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $1.4 billion, indicating 19.1% growth on a year-over-year basis. The consensus estimate for total earnings is pinned at 86 cents per share, suggesting a 62.3% surge from the year-ago quarter. There has been no change in analyst estimates or revisions lately. Image Source: Zacks Investment Research COHR has an impressive earnings surprise history. In the four trailing quarters, it surpassed the Zacks Consensus Estimate, with an average surprise of 20.3%.Coherent Corp. Price, Consensus and EPS Surprise  Coherent Corp. price-consensus-eps-surprise-chart | Coherent Corp. QuoteCoherent Showcases Lesser Chances of Posting Q3 Earnings BeatOur proven model does not conclusively predict an earnings beat for COHR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Coherent has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Telecom Segment to Have Been COHR’s Driver in Q3We anticipate the top line to have benefited from the telecom segment’s boom. In the second quarter of fiscal 2025, revenues in this segment increased 11% year over year and 16% from the previous quarter. Solid demand for newly launched products, including 100G, 400G and 800ZR/ZR+, coherent transceivers are likely to have fueled the telecom segment’s revenue growth.Coherent Stock SoarsCOHR shares have gained 23.7% in a year compared with the 24.6% rise of its industry and 10% growth of the Zacks S&P 500 composite. The company has performed better than its industry peers, Alithya Group Inc. ALYAF and AirJoule Technologies Corporation AIRJ. ALYAF and AIRJ have declined 16.6% and 55.6% in a year, respectively.One-Year Price Performance Image Source: Zacks Investment Research The COHR stock is looking pricier than its industry and Alithya Group, but is cheaper than AirJoule Technologies. Coherent is currently trading at a trailing 12-month price-to-earnings ratio of 2.67X, higher than the industry’s and Alithya Group’s 1.76X and 1.28X, respectively. AirJoule Technologies is trading at 7.83X, higher than Coherent.COHR’s Investment ConsiderationsWith the rising traffic between data centers due to increasing AI workloads, the telecom industry is expected to boost investments in higher-capacity interconnects, driving investments in optical transport networks.The rapid increase in data volume due to the surge in AI’s potential makes AI models complex and demands faster and more efficient data transmission. Therefore, it is fair to assume that the demand for COHR’s datacom products, including high-speed optical transceivers, will be boosted due to this growth cycle. With hyperscalers expanding AI training and inference workloads, the shipment of 800G transceivers has increased as well.Per management, 1.6T transceivers will be the primary top-line contributor in 2025. This assures growth beyond the 800G cycle. Management performed a customer evaluation for 1.6T transceivers and disclosed that Coherent would witness a smooth transition to the next cycle of technology without deteriorating the demand for 800G.However, expected revenue growth can be dampened by delayed AI infrastructure spending. There can be periods of growth deceleration that may shake investors’ confidence. Furthermore, geopolitical risks, mainly concerning the United States and China, and potential tariffs may disrupt supply chains, thereby impacting Coherent’s costs and ability to meet demand.Verdict: Hold Coherent for NowCOHR’s long-term growth primarily depends on AI expansion. The top line is subjected to growth on the back of rising demand for Coherent’s transceivers that facilitate faster and more efficient data transmission. Although management is bullish about the demand for its products, it may be misled by delayed AI infrastructure spending and the uncertainty lying within the tariff war.Coherent, despite being a fundamentally strong stock, possesses a premium valuation. Hence, it is beneficial for investors to hold on to the COHR stock for now. We recommend potential investors wait for a better entry point that can emerge if the stock undergoes some correction.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Coherent Corp. (COHR): Free Stock Analysis Report Alithya Group Inc. (ALYAF): Free Stock Analysis Report AirJoule Technologies Corporation (AIRJ): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks